NPRA ‘10: Europe Q2 butadiene contract ‘does not reflect reality’

28 March 2010 19:28  [Source: ICIS news]

SAN ANTONIO, Texas (ICIS news)--The European second-quarter butadiene (BD) contract price of €1,275/tonne ($1,700/tonne) does not reflect true market fundamentals and is too high, a major butadiene consumer said on Sunday.

“€1,275/tonne is too high,” it said on the sidelines of the International Petrochemical Conference (IPC).

The consumer said that supply and demand would be in better balance in the second quarter.

Supply issues would be largely resolved, it said, referring to SABIC’s problems in the UK and the Netherlands, and BASF’s recent problem in Germany. Planned maintenance would be under way at a couple of sites, but preparations would have taken this into account.

The consumer said that the planned turnaround of a major consuming unit from mid-May until the end of June had not been considered. This shutdown would have the potential to free up around 30,000 tonnes of butadiene - a considerable volume for the European market, it said.

“We are concerned about true demand - we wonder whether demand is a result of overstocking,” it said. “Underlying demand is just not that strong.”

The automotive sector - a key end user of butadiene in tyres - was still cause for concern.

The consumer said that figures showed that European car sales in the first quarter were shaping up to be well below pre-recession levels. This was attributed to the removal of the incentive schemes implemented by several European governments in 2009 to boost demand.

“The automotive industry is not running well,” it said, adding that predictions for the near-to-medium term were not encouraging.

It said that tyre producers were able to offset operations in Europe through optimising operations elsewhere and, since there was no viable alternative to SBR (styrene-butadiene-rubber) - the primary butadiene derivative - butadiene increases could be passed through more easily than in the other end-use sectors.

“We can’t play the [butadiene] arbitrage and unlike SBR there is competition for our end-product,” it said. “There are alternatives, so we are under pressure to be competitive.”

The consumer said that it could not understand where the €1,275/tonne contract price had come from, as it had offers of €1,200/tonne and €1,250/tonne.

The contract is settled on a free delivered (FD) northwest Europe (NWE) basis.

Hosted by the National Petrochemical & Refiners Association (NPRA), the IPC continues through Tuesday.

($1 = €0.75)

For more on butadiene visit ICIS chemical intelligence
Click here to find out more on the European margin reports
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By: Nel Weddle
+44 20 8652 3214

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